"With today's settlement, the federal government will ensure that the more than 200,000 African-American and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation," Holder added.

The suit states that Countrywide, which contributed to the 2008 financial crash, offered minority customers costly subprime loans even when they qualified for more affordable standard loans.

Oblivious customers often accepted with the assumption that they were receiving favorable service, when in reality they were being deceived.

Thomas Perez, head of the Justice Department's civil rights division, slammed the misconduct saying, "'This is discrimination with a smile."

"The victims had no idea they were being victimized- they were thrilled to have gotten a loan and realize the American dream," Perez added.

BOA insists it never adapted any improper policies and procedures from Countrywide after purchasing it, and claims that its existing lending practices are legal and nondiscriminatory.